Vijaibabu's Blog - Personal Finance Guide for Financial Freedom

All investments are not equally important. You need to fulfil the basic investment needs first before moving on to the others LEVEL 1 Basic contingency funds:  This is the money that you may need to handle a personal emergency. It should be available instantly, partly as physical cash and partly as funds that can be immediately be withdrawn from a bank. Online banking and ATMs make it relatively simple to get this organised. LEVEL 2 Term Insurance:  Calculate a realistic amount which allows your dependents to finance at least short and medium-term life goals if you were to drop dead or be struck with a debilitating injury or disease. You should have an adequate term insurance before you think of any savings. LEVEL 3 Savings for foreseeable short-term goals:  This is the money needed for expenses that you plan to make within the next two to three years. Almost all of this should be in minimal risk, deposit-type savings avenues. LEVEL 4 Savings for long-term foreseeable goals:

A new financial year has started on April 1. This is a good time to get your personal finance decisions straight. To plan and act this time of the year makes sense for two reasons: after the last minute tax-related investments in the just-ended financial year, your money matters will remain fresh in your mind. starting early in the year allows you to plan more methodically for not just your taxes, but also for your short- and long-term goals.Here are five aspects you should consider planning and executing right away 1.Planning tax-saving investments Last minute exercises in tax planning hurts you in several ways. You may not have enough time to calmly consider the various options and what suits you best. You end up earning sub-optimal interest on a few of the fixed-income options. If you are investing in equity-linked options for tax saving,you may end up investing at the wrong time. You may be forced to make a one-time lump-sum investment. As you can use Systematic Inv

ULIPs don't serve the purpose of either insurance or investment. It's best to go for a term cover. A thoughtful investor should be very clear about what he is going for. Though insurance linked policies have improved substantially but they still have problems. You've to commit to an investment for a very long period of time - it could be penalizing just in case you decide to withdraw early. They're also a compromise on flexibility or liquidity.  Also, your need for insurance changes dramatically. When you're independent and a bachelor, you don't need insurance. The moment you have dependants, the need for insurance come up. These policies do not fulfill that requirement and are unsuited. Do a liberal estimation and go for a term plan.  A sketchy thumb rule is that 10 years annual income should be your term cover. Investors need to look at term plan as a cost, it is not an investment. Look at investment independently. Have a low cost, diversified investm

 Three rules of investment: Invest early Invest regularly Invest for long term and not short term Invest Early : The sooner you start the better. Start investing in small amounts, continuously for a long time, money grows due to the power of compounding. If you start investing when you are single you will be able to save maximum. The best policy is to start saving from the moment you begin earning. Invest Regularly : Develop the habit of adding to your recurring deposit / systematic investment plan of mutual fund / deferred annuity account on a regular basis, perhaps monthly or quarterly. By investing regularly with SIP of mutual funds you take advantage of a strategy called rupee-cost averaging. Regular investing, however, does not ensure a profit or protect against loss in declining market scenario. Invest for Long Term and Not Short Term : If you decide that your money can work for you over a long period of time, then better compounding works. Consider this: Rs 1,0